Thursday 19th June 2014
The currency markets have stabilised somewhat, with Pound/Euro now stuck at €1.25 and failing to be able to break through that resistance level. Pound/Dollar however has risen to a 5 year high of $1.70+ following yesterday’s meeting of the US Federal Reserve (FED). In today’s post I’ll take a look at these 2 currency pairs, and explain how you can take advantage of these excellent rates even if you don’t need to transfer your currency for some time.
We saw the Pound hit a 20 month high against the Euro this week of 1.2562, however some poor UK data has now brought the rate back down to 1.25. This was due to UK Retail Sales that were lower than expected.
The main reason rates are so good are the rumour UK interest rates are going to go up this year, and the fact the EU have recently cut their interest rate. (Higher interest rates or the rumour of higher rates tend to boost a currency due to the higher return for investors.)
This interest rate speculation has now mostly been priced into the market, which is why the current level is now stuck at €1.25. If you need to buy Euros, then consider locking in the rate while it’s so good. It could creep higher of course, but you don’t want to hold out for an inch and risk losing a mile.
Today rates have risen to their highest since 2009, and the level is now sat comfortable above $1.70. Last night the FED announced a further tapering of their Quantitative Easing programme. Usually you would expect this to strengthen the currency and bring GBP/USD rates down, however it was what was not said that the markets focused on.
There was no hint or discussion of interest rates going up any time soon, and they also cut their growth forecasts, resulting in the USD weakening making it cheaper to buy, pushing the exchange rate to the highest in many years.
How to take advantage of the current exchange rates
If you need to convert currency, the current levels are very attractive indeed. Many of my clients have been taking advantage of these levels by using a ‘Forward Contract’.
This works by fixing today’s rate of exchange for up to 2 years, but you only lodge 10% of the total you want to convert. In this way you can guarantee a rate while protecting yourself against the market dropping away. This helps you to budget effectively, while retaining the majority of your capital.
To discuss this type of contract, or to obtain a quote on the currency exchange you need to perform, click below to send me a free no obligation enquiry today. I can provide rates that are up to 5% better than banks or other brokers.